The Bank of Israel is using Google search data to find clues to the state of the Israeli economy, analysing keyword counts reported by Google, before it releases its own official statistics.
And the Bank of England, the Federal Reserve in the US and the central banks of Chile, Italy and Spain, to name just a few, are all examining the potential for using search data to refine their own statistical reporting and forecasting.
One of the key areas that they are examining is whether search data tallies with key economic trends gleaned by more traditional methods – and whether that search data can be used to better forecast the performance of national economies.
The trend for using this information to predict economic activity was, not surprisingly, kicked off by Google when its chief economist, Hal Varian, published a paper in April 2009, entitled 'Predicting the Present with Google Trends'.
The paper examined official retail, vehicle sales, and travel data against information from Google Trends, Google's own analytics service, using the 'R' open source analytics package to examine the data in-depth.
It concluded that taking into account online information could improve the accuracy of economic forecasting by a significant percentage.
That work sparked a cavalcade of activity at universities and central banks around the world.
Erik Brynjolfsson, a member of the Federal Reserve Bank of Boston's Academic Advisory Council and a professor at the Massachusetts Institute of Technology's Sloan School of Management in Cambridge, Massachusetts, studied online data relating to home sales and concluded that the information was more timely than the official figures.
If the Federal Reserve, the US central bank, had access to similar information in the US house-price crash of 2007-2009, it might have had a better understanding of the scale of the economic problems that the US was facing, he said.
"When central bankers were looking at traditional data, they were essentially looking out the rear-view mirror," Brynjolfsson told Bloomberg.
Today, the Bank of Israel, for example, uses search data to better forecast economic slowdowns.
And the Bank of England has been using UK-centric search data in the same vein, too. It keeps track of search terms such as "Jobseekers Allowance" or "JSA" to forecast spikes in unemployment. The Bank of Chile, meanwhile, uses search data to better forecast vehicle sales.
Perhaps most intriguing of all, though, was a paper written by Concha Artola and Enrique Galan for the Bank of Spain. They compared travel-related search queries in the UK against the actual inflow of tourists into the country and concluded that levels could be forecast with a lead time of about a month.
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